Gran Tierra Energy commenced testing operations for Costayaco-3, the third well drilled in the Costayaco field, a new oil field discovered in 2007, on March 19. The Costayaco field is located in the Chaza Block in the Putumayo Basin, where Gran Tierra Energy has a 50% interest and is the Operator; Solana Resources holds the remaining 50% interest. The well drilled through the same reservoir sequences encountered in Costayaco-1 and -2, reaching a total depth of 8,620 feet on February 20. Initial log interpretations from data acquired during drilling indicate potential hydrocarbon pay in the Kg Sand Unit of the Rumiyaco Formation, the U Sandstone Unit of the Villeta Formation, the T Sandstone Unit of the Villeta Formation and the Caballos Formation. Good oil shows were encountered through these reservoir sections. Gran Tierra Energy has interpreted a potential oil-water contact from logs at a depth of 8511 feet measured depth (-7260 feet subsea) in the lower Caballos Formation, approximately 34 feet lower than the lowest known oil in Costayaco-2. No evidence of an oil-water contact has been identified in the other potential pay zones.
Gran Tierra Energy expects testing operations to last for approximately one month. Similar to Costayaco-2, which tested a maximum of over 6,600 barrels of oil per day (BOPD), only the primary T Sandstone and Caballos reservoirs will be tested.
Gran Tierra Energy programmed a Long Term Test (LTT) for Costayaco-2 in the next four months. LTT production rates for Costayaco-2 will vary from 1,800 BOPD to 3,500 BOPD from different zones which will be determined and adjusted during the testing period. A 6 inch production flowline from Costayaco-2 to Costayaco-1 has been completed and is expected to be operational by the end of March.
Work is underway to reduce production constraints beyond Uchupayaco in order to accommodate potential production growth from Costayaco, which is expected to rise to 6,000 - 9,000 BOPD gross during the second half of 2008. Gran Tierra Energy is currently evaluating a second stage of infrastructure expansion, to incorporate additional drilling through the balance of 2008 and potentially into 2009.
Juanambu Update, Guayuyaco Block
Construction of the 6 kilometer flow line from the Juanambu oil field, another new oil field discovered in 2007, was completed on February 29. Approximately 1,300 to 1,500 BOPD is now being transported through the flow line to Gran Tierra Energy's Toroyaco facilities. This flow line replaces trucking operations that had been utilized for the last six months. The Juanambu oil field is in the Guayuyaco Block in the Putumayo Basin, where Gran Tierra Energy is the Operator with a 35% working interest; Solana Resources holds a 35% working interest and Ecopetrol S.A. holds a 30% working interest.
Popa-2 Exploration Well, Rio Magdalena Block
Location construction for the Popa-2 exploration well in the Rio Magdalena Block in the Middle Magdalena Basin has begun, with drilling expected to begin in early April. This well will be drilled near a non-commercial oil discovery made by Gran Tierra Energy in 2006 at Popa-1, which tested approximately 160 BOPD. Gran Tierra Energy is the operator of the Rio Magdalena Block and has a 100% working interest. Under the terms of a recently completed farmin agreement, Omega Energy Colombia will earn a 60% share of Gran Tierra Energy's interest. In the event of a commercial discovery, Ecopetrol S.A. has a right to back in for a 30% working interest, to be split proportionally between Gran Tierra Energy and Omega Energy Colombia.
Planning is continuing for the work-over of the Palmera-1 well, an old exploration well that had potential oil pay indicated on logs but which was never tested. Testing is scheduled for the second quarter. In addition, newly acquired 3-D seismic data is currently being interpreted in preparation for drilling an exploration well in the fourth quarter of 2008. Gran Tierra Energy is operator of the Azar Block and has a 40% working interest.
Acquisition of approximately 20,000 linear kilometers of new high definition airborne gravity and magnetic data over the entire area of Blocks 122 and 128 is continuing. Approximately 10,100 linear kilometers, or 51% of the program, has been acquired to date. This data will be used to define exploration leads over which 2-D seismic data will be acquired in the Second Exploration Period of each block. Block 122 encompasses approximately 1.2 million acres and Block 128 encompasses approximately 2.2 million acres of land. Gran Tierra Energy is operator and holds a 100% working interest in both exploration blocks.
Well design, rig contracting, and planning continue for the drilling of the Proa-1 exploration well in the third quarter in the Surubi Block in the Noroeste Basin of northern Argentina. Gran Tierra Energy is Operator and has a 100% working interest in this block. In addition, technical evaluation work and a variety of well work-overs continue in Gran Tierra Energy's other six landholdings in the basin.
Commenting on progress, Dana Coffield, President and Chief Executive Officer of Gran Tierra Energy Inc., stated, "2008 is off to an extremely strong start. Production for the first two months of 2008, net after royalty, has averaged 3,126 BOPD. With field delineation drilling operations, production testing operations, exploration drilling operations, and remote sensing data acquisition operations taking place across our three operating arenas Colombia, Peru, and Argentina, we are on track to have another extremely successful year as we continue to build a substantial international oil and gas company."
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